Brazil's Economy Just Imploded

Tyler Durden's picture

China may have mastered the art of fabricating economic data to a level unmatched by anyone except the US Department of Labor, but its derivative countries have much to learn. And none other more so than one of China's favorite sources of commodities over the past decade: Brazil. It is here that things are going from worse to catastrophic, as disclosed in today's update of Brazil's fiscal picture.

Here are the disturbing facts showing that behind the world's propaganda growth facade, it is all hollow: Brazil's consolidated public sector primary fiscal balance, which posted a significantly worse than expected R$8.1bn primary deficit in November driven by the R$6.7bn deficit of the Central Government, dipped into negative territory: -0.18% of GDP, driven by the significant deterioration of the Central Government finances.

This is the worst fiscal outturn since November 1998. Furthermore, the primary surplus of subnational government (States and Municipalities) has also been eroding, a reflection of the authorizations given by the Treasury since 2011 for increased borrowing by the States. For instance, the States and Municipalities posted a negligible 0.08% of GDP surplus during Jan-Nov 2014, down from 0.46% of GDP during Jan-Nov 2013.

It gets worse: the overall public sector fiscal deficit widened to a very high 5.82% of GDP (the highest fiscal deficit since September 2003) given the high 5.64% of GDP net interest bill and steady erosion of the primary fiscal surplus. Given the BRL depreciation during the month, the interest on the stock of Dollar swaps issued by the central bank reached R$8.7bn.

The steady decline of the public sector savings rate is leading to a wider current account deficit despite weaker growth and low investment. In fact, the twin fiscal and current account deficits are now tracking at a combined, very troublesome 9.9% of GDP, the worst picture in 15 years (since September 1999). Repairing the severely unbalanced macro picture demands a deep fiscal and quasi-fiscal adjustment and a significantly weaker BRL.

Last but not least, gross general government debt rose to 63.0% of GDP in October, up from 56.7% of GDP in 2013 and 53.4% of GDP in 2010 (and the highest level since October 2009).

To summarize, in Goldman's words

  • The fiscal picture has deteriorated very significantly since 2011 at both the flow (fiscal deficit) and stock (gross public debt) levels.
  • President Rousseff and Finance Minister designate Levy will face, among other things, the very significant challenge of repairing the severely deteriorated fiscal picture.
  • The steady erosion of the fiscal stance pushed net and gross public debt up. Furthermore, fiscal and quasi-fiscal activism undermined the effectiveness of monetary policy, contributed to inflation very high and drove the current account deficit to a very high level despite weak growth.

In other words, after Japan, this is merely the latest Keynesian success story. And now BTFATH in the S&P 500 because the US will, any minute now, decouple from the entire world.

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SoDamnMad's picture

No problem. JUst borrow from the new BRIC bank.  Oh,wait......

hedgeless_horseman's picture



Everything is fine in Brazil.

Come on in...the water is great!


Consider doing a little shopping and spend those USD when you visit.  Brazil stores are safe as can be!

TBT or not TBT's picture

But Chinese workers produced a lot of fine solutions for modern living using raw materials from Brazil. I love to point out container ships in the bay to my toddler. Look cutie they are bringing more stuff from China to our Costco. It's a Goldie Locks situation.

winchester's picture
winchester (not verified) TBT or not TBT Dec 29, 2014 12:35 PM

new dated from april !! you fucking kidding me....

Self-enslavement's picture
Self-enslavement (not verified) winchester Dec 29, 2014 3:20 PM

Brazil is the richest country n the world. Their economy is on steroids. Whoever wrote this article is an imbecile...

Manthong's picture

Well, at least they can look forward to making mountains of money on the Olympics.

Soul Glow's picture

When Brasil's economy crashes will there be parties in the streets?

quasimodo's picture

Not sure about the water, but the beaches look mighty fine


shovelhead's picture

1.) Shark protection patrol.

2.) Blue light special on rubber bullets.

Ghost Writer's picture

An increase in government debt from 53% to 63% over four years seems ominous.

How does that compare to the increase in United States government debt over the same period?

sun tzu's picture

From 68% in 2008 to over 103% in 2014

blaireauhedge's picture
blaireauhedge (not verified) Dec 29, 2014 12:09 PM

Interesting how all those countries challenging the USD hegemony are "imploding".

PartysOver's picture

Always some pain while making a transition.  Not saying it will be successful but when the perception of a better way is more deisrable then the current it will be attempted.

TBT or not TBT's picture

To crack some eggs, you gotta make an omelette, do you not?

WOAR's picture

Sometimes, people crack eggs just to crack eggs.

blaireauhedge's picture
blaireauhedge (not verified) PartysOver Dec 29, 2014 12:59 PM

My point is that obviously the U.S. is pulling all stops economically to deter those countries from breaking away.

TBT or not TBT's picture

Cher frenchie, this is simply the result of bubbles popping, and those result from central planning, from which Brazil's biggest customer China suffers badly. The U.S. has less central planning (far too much, still, but less nevertheless) than China or Brazil or any of the sclerotic EUtopias like France. It's a bitch not being the USA, very often.

Lea's picture

"It's a bitch not being the USA, very often."

Do not brag. Where would you be if the dollar wasn't the reserve currency, which allows America to make money out of the labor of others? And even then - when all it has to do is print - America has achieved building a colossal debt, so huge it is jeopardizing its future for generations. BTW, if it wasn't constantly raising its debt ceiling (something the other countries cannot do), it would have defaulted long ago.

Given the open-air loony bin America is, I thank the Lord every day I was not born American.

NotApplicable's picture

Yet another "controlled collapse" in order to protect the facade of a safe-haven.

noben's picture

Or losing planes.

wisebastard's picture

If it was that important it would be on the news.......DUH 

angel_of_joy's picture

... interesting how all those countries challenging the USD hegemony are "imploding".

There is always the intriguing posibility of DEFAULTING on foreign debt, especially on the USD denominated one. It's how you turn tables against the TBTF. In a rigged game, you don't follow the rules...

Quinvarius's picture

When the world is forced to start taking one of two sides because of a dipshit's version of foreign policy, you only get access to 1/2 of the markets.  This will get worse because Obama doesn't know any better.

HedgeHammer's picture

Oh for shit sakes BREAK already!!!

gramps's picture

I thought fiscal deficits and 100% debt/gdp were a good thing? Consume MOAR!

Pool Shark's picture



Yeah! Their Debt/GDP is a niggardly 63%?


Japan is 250% ahead of them.

C'mon, get spending!!!


["My name is Paul Krugman, and I approve this message."]

chubbar's picture

+1 for working "niggardly" into a sentence (and for not being called a racist after doing it) :)!

TBT or not TBT's picture

Oh, they'll catch up sometime. That's what excessively democratic countries do. Demagogues gotta buy votes.

RichardParker's picture

+1 for the comment as well as the avatar pic.

Smegley Wanxalot's picture

Brazil just reelected President Dildo Reject so all is good, sim?

q99x2's picture

Arrest Loyd Blankfein

Seasmoke's picture

So the World Cup didn't help ???

Parafuso's picture

No. On the contrary, during the Copa, for which all government offices, banks, the BOVESPA and factories closed repeatedly to watch grown men kicking a ball, commerce and production froze... hard.  Ultimately, it was all to watch the national team get it's ass handed to it.... also hard. The Copa came on the heels of the summer holidays that were already extended de facto by a late Carnaval. In consequence, and in short, summing the many and diverse national, state, local and religous holidays in addition to the Copa event, but excluding the mandatory paid month off employed people take, Brasil was largely shut down for fucking-off for at least 3 months in 2014. AAnd they wonder why they are poor....An already weak situation was further trammeled by enedmic sloth in the country of the future.


Crisismode's picture



Oh . . . . riiiight, it was the weather!

Numbers will improve with better weather!


rodocostarica's picture

Brazil can go to hell in my opinion. I was down in Argentina and wanting to  visit Brazil in the very month Lehman collapsed in order to hook up with my friend who was coming in to Sao Paulo.  

Bought a ticket to Brazil from Argentina to meet the friend in Sao Paulo. And the bitch travel agent in Argentina did not mention the reciprocity fee visa of $150.00 I would need to get into Brazil as a gringo. Checked out of my hotel in Argentina and got to the airport at like 5Am. A guy comes down the line and asks for my visa. I say I don't have one. he says you can't get on the flight and have to go back into town to the Brazil embassy to get the visa. So I go back into town check back into my hotel room and then go to the Brazilian embassy when they opened.

I get the pleasure of an interview with the Brazilian bitch from hell to ask for the visa. She immediately starts ranting about how I am a gringo and that YOU MUST PAY THIS FEE because your president (Bush at the time) charges us Brazilians a fee for visa so we charge you.

I sit back relaxed and say to her listen madam my name is not George Bush, I am not in favor of visa fees and simply want to go to your country and spend some money. So basically since your attitude is so nasty then fuck you and I will stay in Argentina and spend my money here. Best of luck. I did say fuck also which she did not appreciate but  I loved it.

Due to the Lehman collapse their currency nosedived right after that. I was happy.

my friend from the EU just met me in Argentina and we had a grand old time. (taking 700$ from a kirchner owned casino in Buenos Aires putting my friend on the pass line on craps table and he hit some numbers straight. He had never rolled dice so I backed him on the pass line.

Wanted to go to the world cup this year to watch my team Costa Rica. (also USA) but once again what a hassle getting a visa and fees etc. So I said fuck it.

Wish I would have been able to go as Costa Rica rocked the world cup for their size but could not deal with the high prices the Brazilians charged for accommodations. Airbnb were total rip-offs.

Anyway sorry for the rant but am very happy to see Brazil nose dive. A bunch of assholes government wise. Not the people but the government yes.

Karaio's picture


You need to see how Brazilians are treated by their country!

There Brazilian moving over 500 km (kilometers) to get a visa to the US.

Undergo a strange interview, must prove that has goods and having a steady job in Brazil.

Not sure if this has changed, I gave up visiting the US for the same reason that you have not visited Brazil.

If you do not like it, your problem.

Reciprocity is it.

Oh, if you were Argentina, Chile, Paraguay, Brazil, Uruguay, could cross borders only with your driver's license.


cowdiddly's picture

Nah, their alright, tons of exports and China's breadbasket. Just a double wammy of low oil prices and strong US dollars. If the US dollar keeps getting even more strong then their will be pain for everyone including the US exports. Who can outlast who. But you are right its a BRIC war. Debt at 63% of GDP or US at 106% GDP. and then their is the Goldman, IMF, World bank terrorists to consider. Place your bets, I did.

I bet on Chinese loans. 1.4 billion chinamen like to eat

Seasmoke's picture

Silly me. I bet on Gold and Silver. (But at least smart enough to be physical)

SYantiss's picture

Could you please take a moment and learn the difference between their, there and they're. It really would make your writing much more intelligible.

Thank you.

cowdiddly's picture

I learned the difference, I was just typing fast. A writing expert told me once that people like me, that color outside the lines tend disregard rules and sometimes get into trouble. I could not argue.

But, Thanks for the tip School marm.

Oldballplayer's picture

My brother writes like that.

He is a retard.

You can tell from the writing.

Come on man, when people misuse their, there and the other is not because you write quickly.  Its because you are probably typing a in a second language.  Take five minutes and write down the differences.

cowdiddly's picture

Nope. Graduated college near the top of my class and belong to an Honors Society. I am just an Outlaw.

Comformity is for you and the rest. And if your brother is a retard...............I used to think my brother was too, but come to find out he was off the charts.

The smartest man I've ever had the good fortune to have known  had a 2nd grade education and could barely write.

Now get back to your lil spellin bee